Limited Liability Partnership Act, 2008 governs the Limited Liability Partnership (LLP) in India, not the Limited Partnership Act.
A Limited Liability Partnership is indeed a Hybrid Form of a partnership firm, where the LLP is a separate legal entity from its partners. The LLP structure provides the benefits of limited liability to its partners while allowing them to actively participate in the management of the business.
The Registrar of LLPs is responsible for maintaining a registry of all LLP Registration in India and administering the provisions of the LLP Act. The Ministry of Corporate Affairs (MCA) oversees the functioning of the Registrar of LLPs and ensures compliance with the provisions of the LLP Act.
Why to choose LLP rather than Partnership Firm, any Advantages?
The following are some of the advantages of LLP:
a) Easy to form: An LLP is relatively easy to set up compared to a company, with a simple registration process and minimal compliance requirements.
b) No restriction on the maximum number of persons: Unlike a partnership firm, an LLP can have an unlimited number of partners.
c) No mandatory audit required: An LLP is not required to conduct a statutory audit if its turnover and capital contribution fall below certain thresholds.
d) No requirement for minimum capital contribution by partners: There is no requirement for partners to contribute a minimum amount of capital to start an LLP, making it easier for smaller businesses to form.
e) Lesser compliance requirement: Compared to a company, an LLP has fewer compliance requirements, making it easier for small businesses to operate.
f) Limited liability of partners: The liability of the partners in an LLP is limited to the amount of capital they have contributed, except in cases of fraud or negligence.
g) Less government intervention: An LLP has relatively lesser government intervention compared to a company, allowing for greater flexibility in operations.
h) Separate legal entity and perpetual succession: An LLP is a body corporate with a separate legal entity from its partners, and it has perpetual succession.
i) Easy to dissolve: An LLP can be easily dissolved, making it a flexible business structure.
j) Applicable to any trade or business: An LLP can be formed for any lawful business or trade, making it a suitable option for a wide range of businesses.
Documents required for the LLP Registration in India-
- Consent of Partners: The consent of all partners to become a part of the LLP and fulfil their obligations is required. This can be in the form of a signed declaration.
- Object of the LLP: The LLP agreement must clearly state the business activities that the LLP intends to undertake.
- Certified true copies of Board Resolution: If any partner of the LLP is a body corporate, certified true copies of the Board Resolution passed by the body corporate partners authorizing them to become a partner in the LLP is required.
- Approval from Sectoral Regulator: If the LLP belongs to a sector that is regulated by a specific regulatory authority, an approval from the sectoral regulator may be required.
- Detail of other Companies: Details of any other LLPs or companies in which the designated partners or partners are directors or partners need to be provided.
- NOC from Foreign Company: If a foreign company intends to incorporate an LLP in India and wishes to use its name, a no-objection certificate (NOC) from the foreign company is required.
These documents are crucial for the successful registration of an LLP in India. It is important to note that the requirements may vary depending on the state in which the LLP is being registered.
Learn the Importance of LLP Deed and How it’s different from Partnership Deed
An LLP deed is an agreement that governs the relationship between partners and sets out the terms and conditions of their partnership. It is a legally binding document that outlines the mutual rights, duties, and obligations of the partners towards each other and the LLP. The LLP deed plays a critical role in the functioning of the LLP and is important for the following reasons:
- Establishes Rights and Obligations: The LLP deed establishes the rights and obligations of the partners towards the LLP and each other. It outlines the roles and responsibilities of the designated partners and the profit-sharing ratio among the partners.
- Avoids Conflicts: The LLP deed helps to avoid conflicts among the partners by clearly defining their respective rights and obligations. It also provides a framework for dispute resolution in case of any disputes.
- Protects Partner's Interests: The LLP deed protects the interests of the partners by providing for the management of the LLP, including decision-making and governance structures.
- Legal Protection: The LLP deed offers legal protection to the partners and the LLP. It defines the liability of the partners, and the extent of their liability towards the LLP.
- Compliances: The LLP deed provides guidelines for compliances that the LLP must adhere to, such as maintenance of proper books of accounts, tax compliance, and other legal compliances.
The LLP deed is different from a partnership deed in several ways.
A partnership deed is an agreement between two or more individuals who come together to carry out a business venture. In a partnership firm, the partners are jointly and severally liable for the debts and obligations of the firm.
On the other hand, in an LLP, the partners have limited liability, and their liability is limited to the extent of their contribution to the LLP. LLP deed is created under the provisions of the LLP Act and is a legally binding document that sets out the terms and conditions of the partnership between the partners of the LLP. The LLP agreement is essential for the functioning of the LLP and must be in compliance with the provisions of the LLP Act 2008.
Further, an LLP has perpetual existence and can continue to exist even if one or more partners cease to be a part of the LLP. The LLP deed, therefore, takes into account these differences in the nature of the business and the legal framework governing the LLP.
Simple Steps Involved In The Process of Registration of A Limited Liability Partnership (LLP) online in India through Fillip Form
STEP 1 – Name Reservation
The First and foremost important step in the registration of an LLP is to reservation of LLP Name. Name of LLP can be applied through filing of Form RUN-LLP (Reserve Unique Name Limited Liability Partnership) to the MCA.
Once the name is approved by the MCA, the name approval letter will be issued to the proposed partners and the name will be reserved for 90 days.
STEP 2– Obtain A Digital Signature Certificate (DSC)
Digital signature will be required for all the partners including Designated Partners to file the form online.
The form must be digitally signed by all the designated partners of the LLP and by an advocate, company secretary, chartered accountant, or cost accountant in practice. The digital signatures ensure the authenticity of the application and the identity of the signatories.
STEP 3 – File Fillip Form for Incorporation
After obtaining name approval, the LLP agreement must be prepared. This agreement must be in compliance with the provisions of the LLP Act and must be filed along with Fillip.
Thereafter have to file FiLLiP along with the LLP agreement, proof of address of registered office, and identity proof of partners and designated partners. DIN is mandatory to have who wants to become the designated partner in the LLP. The application for DIN can be applied through fillip only along with Incorporation of LLP.
FilliP must be filed within 90 days of obtaining name approval. Form FiLLiP is the application form used for the online registration of a Limited Liability Partnership (LLP) in India. The form contains details such as the proposed name of the LLP, the main business activities of the LLP, the details of the designated partners, and the registered office address of the LLP.
Once the Registrar of Companies (ROC) is satisfied that all the requirements for the incorporation of the LLP have been complied with, he will issue a Certificate of Incorporation. The Certificate of Incorporation is a legal document that certifies the formation of the LLP and includes details such as the LLP's name, registration number, and date of incorporation.
The Certificate of Incorporation (COI) is conclusive evidence of the formation of the LLP and is required to open a bank account, obtain other registrations such as PAN and TAN, and commence business activities.
On incorporation, an LLP identification number (LLPIN) will be assigned to every LLP registered so.
Some FAQ’s Related to the LLP Registration-
Q. Can we Alter or modify the LLP Deed once filed in form-3 after Incorporation?
Yes, it is possible to alter or modify the LLP Deed even after the incorporation of an LLP by filing Form 3 with the Registrar of Companies (ROC).
LLP Deed can be modified or altered in the following ways:
- Change in Name or Address of LLP: If there is any change in the name or registered office address of the LLP, then the LLP needs to file Form 15 with the ROC.
- Change in Partners' Contribution or Profit Sharing Ratio: If there is any change in the contribution or profit sharing ratio of partners in the LLP, then the LLP needs to file Form 3 along with the supplementary agreement for the changes.
- Change in Business Activity: If the LLP wants to change its business activity or wants to add any new activity, then it needs to file Form 5 with the ROC.
- Change in LLP Agreement: If there are any other changes to the LLP agreement, then the LLP needs to file Form 3 with the ROC along with the modified LLP agreement.
It is important to note that any change in LLP agreement must be made with the consent of all partners and should be properly documented in writing. The LLP also needs to pay the required fee for making the changes in the LLP agreement which is normally 100 Rs. For Supplementary deed
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Q. In case of Dispute in LLP how to resolve ?
In case of a dispute/Conflict between partners or among partners and the LLP, the following are the available options to resolve the dispute:-
- Mediation: Mediation is a process in which a neutral third-party mediator assists the parties in reaching a mutually acceptable solution. The mediator helps the parties to identify the issues in dispute and facilitates communication between them. Mediation can be voluntary or court-ordered.
- Arbitration: Arbitration is a process in which the parties to a dispute submit their differences to a neutral third-party arbitrator or panel of arbitrators. The arbitrator(s) listen to the evidence and arguments of both sides and make a binding decision that is enforceable by law.
- Legal Proceedings: If the dispute cannot be resolved through mediation or arbitration, the parties can opt for legal proceedings. Legal proceedings involve filing a case in a court of law and presenting evidence and arguments before a judge. The court then makes a binding decision that is enforceable by law.
It is advisable for the LLP to have a dispute resolution mechanism in place in its LLP agreement, which specifies the procedure for resolving disputes between the partners or between the partners and the LLP. The dispute resolution mechanism can include provisions for mediation, arbitration, or other alternative dispute resolution mechanisms. It is important to note that the dispute resolution mechanism should be agreed upon by all partners and should be in accordance with the provisions of the LLP Act, 2008 and the LLP Rules, 2009.
Q. Partners will be liable for any LLP Fault in non-compliances ?
As per the Limited Liability Partnership Act, 2008, the partners of an LLP are generally not personally liable for the debts or obligations of the LLP. The liability of the partners is limited to the extent of their agreed contribution in the LLP.
However, the partners can be held liable for the non-compliances or wrongful acts committed by the LLP in certain circumstances, such as:
- Fraud or Misrepresentation: If a partner of an LLP commits fraud or misrepresentation in the conduct of the business of the LLP, then he or she can be held personally liable for such acts.
- Negligence or Misconduct: If a partner of an LLP acts with negligence or misconduct in the conduct of the business of the LLP, then he or she can be held personally liable for any loss or damage caused by such acts.
- Breach of Duty: If a partner of an LLP breaches his or her duty to the LLP, such as duty of loyalty, duty of care, or duty of disclosure, then he or she can be held personally liable for any loss or damage caused to the LLP.
- Non-Compliance: If an LLP fails to comply with any statutory requirement, such as filing of statutory forms or maintaining proper books of accounts, then the partners of the LLP can be held liable for such non-compliance.
- Therefore, it is important for the partners of an LLP to ensure that the LLP is compliant with all statutory requirements and that they act in the best interest of the LLP. The LLP agreement should also contain provisions for the allocation of liability among the partners in case of any non-compliances or wrongful acts committed by the LLP.
Q. What are the basic clauses should be incorporated in LLP deed?
Basic clauses in an LLP deed may vary based on the specific requirements of the LLP and the agreement between the partners. However, there are certain mandatory clauses that must be included in an LLP deed as per the provisions of the LLP Act, 2008 and the LLP Rules, 2009.
As per Rule 23 of the LLP Rules, 2009, the LLP agreement must contain at least the following clauses:
- Name of the LLP
- Nature of business to be carried out by the LLP
- Name and details of the partners
- Contribution of partners
- Profit sharing ratio among partners
- Rights and duties of partners
- Management and decision-making process of the LLP
- Rules for holding meetings and maintaining records
- Procedure for admission and retirement of partners
- Procedure for transfer of ownership of LLP
- Dissolution of the LLP and its consequences
Apart from the above clauses, the LLP agreement may also include additional clauses that are mutually agreed upon by the partners. These clauses can cover various aspects such as dispute resolution, non-compete agreements, confidentiality clauses, etc. The exact number and content of the additional clauses may vary depending on the requirements of the LLP and the mutual agreement between the partners.
Q. In case of LLP, Auditor appointment is also a mandatory like Company ?
Yes, appointment of an auditor is mandatory for an LLP if its annual turnover exceeds Rs. 40 lakhs or if its contribution exceeds Rs. 25 lakhs, as per the provisions of the Limited Liability Partnership Act, 2008 and the LLP Rules, 2009.
The LLP must appoint an auditor within 30 days of its incorporation and the auditor must hold office till the conclusion of the next annual general meeting. The LLP can re-appoint the same auditor or appoint a different auditor at the next annual general meeting.
The auditor of an LLP is responsible for conducting an independent audit of the financial statements of the LLP and expressing an opinion on the true and fair view of the financial position of the LLP. The auditor is also responsible for reporting any material misstatements or deficiencies in the financial statements to the partners of the LLP and the Registrar of Companies.
It is important for the LLP to appoint a qualified and competent auditor who has the necessary knowledge and experience to carry out the audit of the financial statements of the LLP. The auditor should also comply with the auditing standards prescribed by the Institute of Chartered Accountants of India (ICAI) while conducting the audit of the LLP.
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